Canada: Family Matters: Reconsideration Decision Affirms That Sales To Subsidiary Are Subject To BC Utilities Commission Regulation
Global Energy and Climate Bulletin

Powell River Energy Inc. ("PREI") filed an application for reconsideration of an earlier order of the British Columbia Utilities Commission (the "BCUC") on the basis that the BCUC had made a legal error in determining that PREI fell within the definition of a "public utility" under section 1 of the Utilities Commission Act (the "UCA") and was therefore subject to regulation by the BCUC. In Decision and Order G-91-24, the BCUC dismissed PREI's reconsideration application and confirmed that PREI meets the statutory definition of a public utility and does not fall within an statutory exclusion.

Background

As we summarized in our previous bulletin reviewing the BCUC's original decision (Decision and Order G-332-23), PREI is engaged in selling power generated at two hydroelectric facilities in British Columbia to the United States through a chain of affiliated companies. PREI unsuccessfully argued that these affiliated companies constituted the same "person" under the UCA and that it was engaging in electricity sales within the same corporate organization and therefore not reselling electricity.

PREI's reconsideration application, brought under section 99 of the UCA, focused on the BCUC's interpretation of the exclusion in (d) of the definition of "public utility" found in section 1 of the UCA (the "Exclusion") which excludes "a person not otherwise a public utility who provides the service or commodity only to the person or the person's employees or tenants, if the service or commodity is not resold to or used by others" from the UCA's definition of a "public utility", resulting in an exclusion from BCUC regulation. PREI argued that the BCUC had erred by, in particular, improperly narrowing the definition of "person" to exclude corporate affiliates.

The Reconsideration Decision

The BCUC was not persuaded by PREI's argument that the Exclusion must be interpreted to include circumstances where an entity provides a service or commodity to an affiliated entity.

In particular, the BCUC disagreed that the Exclusion should be divided into the two sub-parts, one which applies to "a person not otherwise a public utility who provides the service or commodity only to the person" and another which applies to "a person not otherwise a public utility who provides the service or commodity only to... the person's employees or tenants" (emphasis added).

According to the BCUC, consistent with other uses of "or" in the UCA, the phrase "only to the person or the person's employees or tenants" only includes circumstances where a person provides a service or commodity to both itself and its employees or tenants. Therefore, the words "to the person" were included in the Exclusion to make it clear that the Exclusion still applies to a person who is providing a service or commodity to the person's employees or tenants, for compensation, and not to other third parties, even if that person uses some of the service or commodity for its own purposes.

As noted by the BCUC, this could occur where, for example, the operator of a ski resort owns accommodations that it leases to tenants using the resort facilities, and has a generator on site to produce electricity. The operator may use some of the electricity it produces for its own operations at the resort, and sell some of the electricity to its tenants (i.e., not other third parties). Similarly, the owner of a pulp mill may have accommodations on site for its employees, and run a generator to provide electricity for its operations. The owner may use some of the electricity it produces to run its pulp mill, and sell some of the electricity to its employees (i.e., not no other third parties). The BCUC observed that it expected that the Exclusion would apply in both of these circumstances.

Conclusion

The BCUC's reconsideration decision affirms that affiliate transactions are not immune from public utility regulation in British Columbia and that the BCUC will treat affiliates, which are separate legal entities, as distinct persons under the UCA. The reconsideration decision also provides clarity around circumstances where the exclusion in (d) of the definition of "public utility" under the UCA would apply, based on the BCUC's interpretation that the Exclusion is properly read as a whole, rather than divided into sub-parts. Ultimately, where a person meets the statutory definition of a "public utility" in the UCA, and is not otherwise excluded or exempted, they will be subject to regulation by the BCUC.

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